You Have Been Given a Choice Between Two Retirement Policies

question 78

Essay

You have been given a choice between two retirement policies as described below.
Policy A: You will receive equal annual payments of $10,000 beginning 35 years from now for 10 years.
Policy B: You will receive one lump-sum of $100,000 in 40 years from now.
Which policy would you choose? Assume rate of interest is 6 percent.

---

Definitions:

Dividends

Payments made by a corporation to its shareholder members from the company's earnings.

Significant Influence

The power to participate in the financial and operating policy decisions of a business, without having control over those policies.

Policy-Making Decisions

The process involving the development and implementation of strategies and guidelines to govern the actions and future direction of an entity.

Voting Power

The total number of votes that can be cast in decision-making processes within a corporation, often directly linked to the amount of shares held.